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On the environmental Kuznets curve with fossil-fuel induced emission: Theory and some illustrative examples

  • Sushama Murty

    (Department of Economics, University of Exeter)

We propose a model of fossil-fuel induced emission, which permits multiple emission-mitigation strategies. In a di erentiable framework, we derive a set of necessary and sucient conditions for an environmental Kuznets curve in terms of the relative responses of the preference and technology-based shadow prices of emission to changes in the economic resource base when the emission policy is not allowed to adjust. Employing these conditions we construct examples of preference and technology combinations that result in an EKC in both static and dynamic frameworks. In these examples, optimal emission-mitigation strategies include employing a part of available resources for cleaning-up activities and inter-fuel substitution from dirtier to cleaner energy inputs. We show that the social optimum can be decentralised not only through standard emission policies such a Pigouvian tax, but also by a scheme that subsidises cleaning-up activities and taxes the usage of fossil fuels.

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File URL: http://people.exeter.ac.uk/cc371/RePEc/dpapers/DP1406.pdf
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Paper provided by Exeter University, Department of Economics in its series Discussion Papers with number 1406.

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Date of creation: 2014
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Handle: RePEc:exe:wpaper:1406
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  1. Gene M. Grossman & Alan B. Krueger, 1994. "Economic Growth and the Environment," NBER Working Papers 4634, National Bureau of Economic Research, Inc.
  2. Murty, Sushama & Robert Russell, R. & Levkoff, Steven B., 2012. "On modeling pollution-generating technologies," Journal of Environmental Economics and Management, Elsevier, vol. 64(1), pages 117-135.
  3. Murty, Sushama & Russell, R. Robert, 2010. "On modeling pollution-generating technologies," The Warwick Economics Research Paper Series (TWERPS) 931, University of Warwick, Department of Economics.
  4. Andreoni, James & Levinson, Arik, 2001. "The simple analytics of the environmental Kuznets curve," Journal of Public Economics, Elsevier, vol. 80(2), pages 269-286, May.
  5. Kijima, Masaaki & Nishide, Katsumasa & Ohyama, Atsuyuki, 2010. "Economic models for the environmental Kuznets curve: A survey," Journal of Economic Dynamics and Control, Elsevier, vol. 34(7), pages 1187-1201, July.
  6. Florenz Plassmann & Neha Khanna, 2006. "Preferences, Technology, and the Environment: Understanding the Environmental Kuznets Curve Hypothesis," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 88(3), pages 632-643.
  7. Robin Mason & Timothy Swanson, 2003. "A Kuznets curve analysis of ozone-depleting substances and the impact of the Montreal Protocol," Oxford Economic Papers, Oxford University Press, vol. 55(1), pages 1-24, January.
  8. Douglas Holtz-Eakin & Thomas M. Selden, 1992. "Stoking the Fires? Co2 Emissions and Economic Growth," NBER Working Papers 4248, National Bureau of Economic Research, Inc.
  9. Sushama Murty, 2014. "Necessary and sufficient conditions for an environmental Kuznets curve with some illustrative examples," Discussion Papers 1407, Exeter University, Department of Economics.
  10. John, A & Pecchenino, R, 1994. "An Overlapping Generations Model of Growth and the Environment," Economic Journal, Royal Economic Society, vol. 104(427), pages 1393-1410, November.
  11. Lopez, Ramon & Mitra, Siddhartha, 2000. "Corruption, Pollution, and the Kuznets Environment Curve," Journal of Environmental Economics and Management, Elsevier, vol. 40(2), pages 137-150, September.
  12. Susmita Dasgupta & Benoit Laplante & Hua Wang & David Wheeler, 2002. "Confronting the Environmental Kuznets Curve," Journal of Economic Perspectives, American Economic Association, vol. 16(1), pages 147-168, Winter.
  13. Lopez Ramon, 1994. "The Environment as a Factor of Production: The Effects of Economic Growth and Trade Liberalization," Journal of Environmental Economics and Management, Elsevier, vol. 27(2), pages 163-184, September.
  14. Selden Thomas M. & Song Daqing, 1995. "Neoclassical Growth, the J Curve for Abatement, and the Inverted U Curve for Pollution," Journal of Environmental Economics and Management, Elsevier, vol. 29(2), pages 162-168, September.
  15. Dinda, Soumyananda, 2004. "Environmental Kuznets Curve Hypothesis: A Survey," Ecological Economics, Elsevier, vol. 49(4), pages 431-455, August.
  16. Stokey, Nancy L, 1998. "Are There Limits to Growth?," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(1), pages 1-31, February.
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